**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





AMENDMENT
      NO. 1


TO


**FORM
      10-QSB**


x
            
            **QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**


**For
      the quarterly period ended June 30, 2006.**


or


o
            
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**


**For
      the transition period from**  **to**





**Commission
      File Number 000-19709**





**NUWAY
      MEDICAL, INC.**


*(Exact
      name of registrant as specified in its charter)*


Delaware
            
            **65-0159115***(State
                or other jurisdiction of*
            
            *(I.R.S.
                Employer**incorporation
                or organization)*
            
            *Identification
                No.)*





**2603
      Main Street, Suite 1155**


**Irvine,
      California 92614**


*(Address,
      including zip code, of principal executive offices)*





**(949) 235-8062**


*(Registrant’s
      telephone number, including area code)*





**Securities
      registered pursuant to Section 12(b) of the Exchange Act:
      None**


**Securities
      registered pursuant to Section 12(g) of the Exchange Act: Common Stock,
      $0.0067 par**


**value.**





Check
      whether the Registrant (1) filed all reports required to be filed by
      Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
      preceding 12 months (or for such shorter period that the registrant was
      required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days. Yes o No x





The
      number of shares of the Registrant’s Common Stock outstanding as of June 30,
      2006 was 62,478,245 shares.





**DOCUMENTS
      INCORPORATED BY REFERENCE: None**




Transitional
      Small Business Disclosure Format (Check one): Yes o No x














**NUWAY
      MEDICAL, INC.**


**FORM
      10-QSB**


**INDEX**








**PART
      I**


**Item
                1**
            Financial
                Statements
            
            4**Item
                2**
            Management's
                Discussion and Analysis
            
            17**Item
                3**
            Controls
                and Procedures
            
            27**PART
                II****Item
                1**
            Legal
                Proceedings
            
            28**Item
                6**
            Exhibits
            
            30Signatures
            
            31Exhibit
                Index
            
            
            32Exhibit
                31.1Exhibit
                31.2Exhibit
                32





-2-




**GENERAL
      NOTE**




THIS
      AMENDMENT NO.1 TO THE QUARTERLY REPORT ON FORM 10-QSB FOR THE SIX-MONTH PERIOD
      ENDED JUNE 30, 2006, OF NUWAY MEDICAL, INC. (THE "COMPANY") IS BEING FILED
      PRIMARILY FOR THE FOLLOWING PURPOSES:




1.
      RECLASSIFYING CERTAIN EXPENSES IN THE THREE- AND SIX-MONTH PERIODS ENDED JUNE
      30, 2006, THAT HAD PREVIOUSLY BEEN ALLOCATED TO SELLING, GENERAL AND
      ADMINISTRATIVE EXPENSES. TOTAL COSTS AND EXPENSES, TO RESEARCH
      AND DEVELOPMENT EXPENSES REMAIN UNCHANGED AS A RESULT OF THIS
      RECLASSIFICATION.




2.
      CORRECTING AN ERROR WHICH INADVERTENTLY OVERSTATED THE AMOUNT BY WHICH THE
      OUTSTANDING PRINCIPAL AMOUNT OF A NOTE PAYABLE HAD BEEN REDUCED IN THE
      PERIOD.










See
        accompanying notes to unaudited consolidated financial
        statements.




-3-





**PART
      I**


**Item
      1. Financial Statements**





**NUWAY
      MEDICAL, INC AND SUBSIDIARY**


**CONSOLIDATED
      BALANCE SHEETS**


**AS
      OF JUNE 30, 2006 AND DECEMBER 31, 2005**




ASSETS


June
                30,
              2006
              (unaudited)
            
            December
                31, 2005
              (audited)CURRENT
                ASSETSCash
                and Cash Equivalents
            
            $
            347,086
            
            $
            283,462Prepaid
                Expenses
            
            
            42,500
            
            
            —Total
                Current Assets
            
            
            389,586
            
            
            283,462TOTAL
                ASSETS
            
            
            389,586
            
            
            283,462LIABILITIES
                AND STOCKHOLDERS' EQUITYCURRENT
                LIABILITIESAccounts
                Payable and Accrued Expenses
            
            
            2,394,718
            
            
            2,312,663Notes
                Payable
            
            
            3,298,070
            
            
            2,740,570Debentures
                Payable, Net
            
            
            21,151
            
            
            21,151Total
                Current Liabilities
            
            
            5,713,939
            
            
            5,074,384COMMITMENTS,
                CONTINGENCIES AND SUBSEQUENT EVENTSSHAREHOLDERS'
                EQUITYConvertible
                  Preferred Series A, $.00067 Par Value, 25,000,000Shares
                  Authorized, 399,322 and 559,322
                Shares
                  Issued andOutstanding
                  at June 30, 2006 and December 31, 2005, respectively
            
            
            268
            
            
            375Common
                Stock, $.00067 Par Value, 100,000,000 Shares Authorized, 62,478,245
                and
                63,333,501 Shares
              IssuedAt
                June 30, 2006 and December 31, 2005, respectively
            
            
            41,860
            
            
            41,016Additional
                Paid-In Capital
            
            
            23,396,137
            
            
            23,396,874Accumulated
                Deficit
            
            
            (28,762,618
            )
            
            (28,229,187
            )Total
                Shareholders’ Equity
            
            
            (5,324,353
            )
            
            (4,790,922
            )TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            389,586
            
            $
            283,462






See
      accompanying notes to unaudited consolidated financial statements.




-4-


**NUWAY
      MEDICAL, INC AND SUBSIDIARY**


**STATEMENTS
      OF OPERATIONS FOR THE THREE- AND SIX-MONTH PERIODS**


**ENDED
      JUNE 30, 2006 AND 2005**




Three-Months
              Ended
                June 30,
            
            Six-Months
              Ended
                June 30,2006
            
            2005
            
            2006
            
            2005(unaudited)
            
            (unaudited)
            
            (unaudited)
            
            (unaudited)RevenueTotal
                Revenues
            
            
            -
            
            
            -
            
            
            -
            
            
            -Costs
                and ExpensesResearch
                and Development
            
            
            73,529
            
            
            -
            
            
            84,298
            
            
            -Selling,
                General and Administrative
            
            
            207,449
            
            
            173,963
            
            
            550,157
            
            
            367,674Depreciation,
                Depletion and AmortizationTotal
                Costs and Expenses
            
            
            280,978
            
            
            173,963
            
            
            634,455
            
            
            367,674Loss
                from operations
            
            
            (280,978
            )
            
            (173,963
            )
            
            (634,455
            )
            
            (104,823
            )Other
                Income and ExpenseInterest
                Expense
            
            
            (93,135
            )
            
            (54,506
            )
            
            (181,296
            )
            
            (104,823
            )Reduction
                to Note Payable andrelated
                accrued interest
            
            
            282,320
            
            
            
            
            
            282,320Net
                Other Income and (Expense)
            
            
            189,185
            
            
            (54,506
            )
            
            101,024
            
            
            (472,498
            )Loss
                Before Income Taxes
            
            
            (91,793
            )
            
            (228,469
            )
            
            (533,431
            )
            
            (472,498
            )Provision
                for Income Taxes (Benefit)
            
            
            
            
            
            
            
            
            
            
            
            -Net
                (Loss)
            
            
            (91,793
            )
            
            (228,469
            )
            
            (533,431
            )
            
            (472,498
            )Loss
                Per Common Share - Basic and DilutedNet
                Loss per Share, rounding
            
            
            (.01
            )
            $
            (.01
            )
            
            (.01
            )
            $
            (.01
            )Weighted
                Average Common ShareEquivalents
                Outstanding
            
            
            62,478,245
            
            
            51,981,236
            
            
            62,418,248
            
            
            51,981,236





See
      accompanying notes to unaudited consolidated
      financial statements.




-5-





**NUWAY
      MEDICAL, INC AND SUBSIDIARY**


**STATEMENTS
      OF STOCKHOLDERS’ DEFICIT (UNAUDITED)**


**FOR
      THE SIX MONTH PERIOD ENDING JUNE 30, 2006**




Preferred
                Stock
            
            Common
                StockNumber
            
            Par
            
            Number
            
            Par
            
            Additional
            
            Retainedof
            
            Value
            
            of
            
            Value
            
            Paid-In
            
            EarningsShares
            
            $.00067
            
            Shares
            
            $.00067
            
            Capital
            
            (Deficit)BALANCE
                DECEMBER 31, 2005
            
            
            559,322
            
            
            375
            
            
            62,333,501
            
            
            41,016
            
            
            23,396,874
            
            
            (28,229,187
            )REISSUANCE
                OF SHARES INCORRECTLY CANCELLED
            
            
            
            
            
            
            
            
            24,744
            
            
            17
            
            
            (17
            )ADJUSTMENT
              TO COMMON STOCK PAR VALUE
            
            
            
            
            
            
            
            
            
            
            
            707
            
            
            (707
            )CONVERSION
                OF PREFERREDTO
                COMMON STOCK
            
            
            (120,000
            )
            
            (80
            )
            
            120,000
            
            
            80
            
            
            -
            
            
            -CORRECTION
                TO PREFERRED STOCK
            
            
            (40,000
            )
            
            (27
            )
            
            -
            
            
            -
            
            
            -
            
            
            -NET
                LOSS
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (533,431
            )BALANCE
                JUNE 30, 2006
            
            
            399,322
            
            
            268
            
            
            62,478,245
            
            
            41,860
            
            
            23,396,137
            
            
            (28,762,618
            )








See
      accompanying notes to unaudited consolidated
      financial statements.





-6-


**NUWAY
      MEDICAL, INC AND SUBSIDIARY**


**STATEMENTS
      OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDING**


**JUNE
      30, 2006 AND 2005**


Six
                Month Periods Ending
              June
                30,2006
              (unaudited)
            
            2005
              (unaudited)CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                Loss
            
            $
            (533,431
            )
            $
            (472,498
            )Adjustments
                to Reconcile Net Loss to Net Cash Used in Operating
                Activities:Issuance
                of Stock for Services
            
            
            -
            
            
            -(Decrease)
                in Prepaid Expenses
            
            
            (42,500
            )
            
            -Increase
                in Accounts Payable and Accrued Expenses
            
            
            82,055
            
            
            167,050Net
                Cash Used In Operating Activities
            
            
            (493,876
            )
            
            (305,448
            )CASH
                FLOWS USED IN INVESTING ACTIVITIESNo
                Cash Used In or Provided by Investing Activities
            
            
            -
            
            
            -CASH
                FLOWS FROM FINANCING ACTIVITIESProceeds
                from Loans
            
            
            777,500
            
            
            486,470Reduction
                to Note Payable
            
            
            (220,000
            )
            
            -Proceeds
                from Sale of Common Stock
            
            
            
            
            
            -Net
                Cash Provided By Financing Activities
            
            
            557,500
            
            
            486,470NET
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            63,624
            
            
            181,022CASH
                AND CASH EQUIVALENTS - BEGINNING
            
            
            283,462
            
            
            -CASH
                AND CASH EQUIVALENTS - ENDING
            
            $
            347,086
            
            $
            181,022





SUPPLEMENTAL
                DISCLOSURES OF CASHFLOW INFORMATIONCash
                Paid During the Period for:Interest
            
            $
            -
            
            $
            -Income
                Taxes
            
            $
            -
            
            $
            -Conversion
                of Debentures and Accrued Interest to Capital
            
            $
            -
            
            $
            -


See
        accompanying notes to unaudited consolidated financial
        statements.


-7-


**NUWAY
        MEDICAL, INC. AND SUBSIDIARY**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS**
 ***(Unaudited)***


**Note
      1. Accounting
      Policies-Basis of Presentation**




In
      the
      opinion of management, the accompanying balance sheets and related interim
      statements of operations, cash flows, and stockholders’ equity include all
      adjustments, consisting only of normal recurring items, necessary for their
      fair
      presentation in conformity with accounting principles generally accepted in
      the
      United States of America (U.S. GAAP). Preparing financial statements requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets, liabilities, revenue, and expenses. Actual results and outcomes may
      differ from management’s estimates and assumptions. Estimates are used when
      accounting for stock-based transactions, uncollectible accounts receivable,
      asset depreciation and amortization, and taxes, among others.




Interim
      results are not necessarily indicative of results for a full year. The
      information included in this Form 10-QSB should be read in conjunction with
      Management’s Discussion and Analysis and financial statements and notes thereto
      included in the NuWay Medical, Inc. Annual Report on Form 10-KSB for the year
      ended December 31, 2005.




**Note
      2. Business and
      Organization**




**Outlook**




The
      Company operated as a shell company during the six-month period ended June
      30,
      2006, and operations primarily consisted of the Company seeking funding,
      maintaining the corporate entity, complying with the reporting and other
      requirements of the Securities Exchange Commission (the "SEC"), engaging in
      ongoing research and development for the BioLargo Technology (as defined below),
      engaging in initial marketing activities for the BioLargo Technology and
      planning for the consummation of certain proposed transactions, as described
      below. See discussion of the letter of intent with IOWC Technologies, Inc.
      (“IOWC”), in Note 5.




The
      Company will need working capital resources to maintain the Company's status
      and
      to fund other anticipated costs and expenses during the year ending December
      31,
      2006 and beyond. The Company's ability to continue as a going concern is
      dependent on the Company's ability to raise capital. If the Company is able
      to
      acquire IOWC, it will need additional capital until and unless that prospective
      operation is able to generate positive working capital sufficient to fund the
      Company's cash flow requirements from operations. The Company has conducted
      an
      offering of its convertible notes and warrants to provide such interim funding
      and intends to seek additional capital. See "Liquidity and Capital Resources"
      below.




Cash
      and
      cash equivalents totaled $347,086 at June 30, 2006. The Company had no revenues
      in the six-month period ended June 30, 2006 and was forced to consume cash
      on
      hand to fund operations. The Company's cash position is insufficient to meet
      its
      continuing anticipated expenses or fund anticipated operating expenses after
      the
      consummation of the transactions with IOWC. The Company will be required to
      raise additional capital to sustain basic operations through the remainder
      of
      2006.




-8-


**NUWAY
        MEDICAL, INC. AND SUBSIDIARY**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS**
 ***(Unaudited)***




The
      financial statements accompanying this Report have been prepared on a going
      concern basis, which contemplates the realization of assets and the settlement
      of liabilities and commitments in the normal course of our business. The Company
      had a net loss of $533,431 for the six-month period ended June 30, 2006; a
      negative cash flow from operating activities of $493,876 for the six-month
      period ended June 30, 2006; and an accumulated deficit of $28,229,187 as of
      December 31, 2005, and $28,762,618 as of June 30, 2006.




As
      of
      June 30, 2006, the Company had limited liquid and capital resources, raising
      a
      substantial doubt about the Company's ability to continue as a going concern.
      Ultimately, the Company's ability to continue as a going concern is dependent
      upon its ability to attract new sources of capital, establish an acquisition
      or
      reverse merger candidate with continuing operations, such as IOWC, attain a
      reasonable threshold of operating efficiencies and achieve profitable
      operations. The financial statements do not include any adjustments that might
      be necessary if the Company is unable to continue as a going
      concern.




The
      Company has approximately $1,945,712 aggregate principal amount of its
      promissory notes that mature at various times during 2006 and the three-month
      period ending March 31, 2007. The Company does not presently have funds
      sufficient to repay these obligations as they mature. Even though the terms
      of
      all of these notes permit the noteholder to convert the notes into shares of
      our
      common stock, until the Company’s stockholders approve an amendment to the
      Company’s charter to increase the number of authorized shares of common stock,
      the Company will be unable to fulfill its obligations to all noteholders to
      permit the conversion into common stock of amounts due pursuant to the terms
      of
      the notes. In the event that the Company has not raised further capital prior
      to
      the maturity dates of the convertible notes, the Company would be in default
      of
      those notes if its stockholders have not formally approved an increase in the
      number of authorized common shares, or unless the Company is able to refinance
      or renegotiate the terms of these notes. No financing is in place at present,
      and it is unknown if any financing will be in place in the future, which would
      permit the Company to repay these notes in full as they mature.




The
      Company has obtained the consent of all of its noteholders to extend the
      maturity date of those convertible notes maturing on various dates through
      November 2006, until after the Company has held a stockholders’ meeting,
      currently anticipated for the fourth quarter of 2006, to approve, among other
      things, an increase in the authorized capital stock of the Company and thereby
      permit the conversion of such notes into shares of the Company’s common
      stock.




-9-


**NUWAY
        MEDICAL, INC. AND SUBSIDIARY**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS**
 ***(Unaudited)***




**Note
      3. Due
      to President - Unreimbursed business expenses**




In
      2003
      and 2004 the Company’s President, Dennis Calvert, loaned money to the Company by
      paying from his personal funds certain of the Company’s expenses. A significant
      portion of these personal funds were obtained by Mr. Calvert by refinancing
      his
      primary residence and cashing out equity thereon. On March 7, 2005, the Company
      and Mr. Calvert agreed such that the $101,770 still outstanding and owed by
      the
      Company to Mr. Calvert will be repaid under the terms of a promissory note
      bearing interest of 10% per annum, requiring monthly payments and maturing
      on
      January 15, 2006. The outstanding loan balance was paid off entirely in January
      of 2006 and totals zero as of June 30, 2006.




As
      of
      June 30 2006, the Company had accrued an expense related to the unpaid accrued
      compensation due its president, Mr. Calvert, in the amount of $333,727. Mr.
      Calvert has tendered to the Company a proposal to convert this unpaid accrued
      compensation to the Company’s common stock upon approval by the Company’s
      stockholders of an amendment to the Company’s Certificate of Incorporation
      increasing the number of authorized shares of its common stock.




**Note
      4. Sales
      of Unregistered Securities**





**First
      Offering**




In
      January 2005, pursuant to a private offering that commenced in October 2004
      and
      terminated in January 2005 (the “First Offering”), the Company received gross
      and net proceeds of $25,000 from an outside investor and issued its convertible
      promissory note (the “First Offering Note”) due and payable one year from the
      date of issuance. The First Offering Note bears interest at a rate of 10% per
      annum, payable on the maturity date. The First Offering Note can be converted,
      in whole or in part, into shares of the Company's Series A Preferred stock,
      on
      the basis of $.005 per share, at any time prior to maturity by either the
      Company or the lender. Each share of Series A Preferred Stock may be converted
      by the holder into one share of the Company's common stock. If the noteholder
      converts the First Offering Note into Series A Preferred Stock, on or after
      the
      note's original maturity date the noteholder may require the Company to buy
      back
      the shares of Series A Preferred Stock for 110% of the principal amount of
      the
      note (the "Buy Back Provision"). If the Company is unable to do so, the
      Company's president, Dennis Calvert, has agreed to buy back the shares on the
      same terms. If shares of Series A Preferred Stock are converted into common
      stock, the holder has the right to include (piggyback) the shares of common
      stock in a registration of securities filed by the Company, other than on Form
      S-4 or Form S-8.




The
      Company's payment obligations under the First Offering Note may be accelerated
      upon the following events: (i) the sale of the Company's assets outside the
      ordinary course of business; (ii) a breach of the representations and warranties
      contained within the evidencing the loan; (iii) the failure to timely pay the
      note; (iv) the Company's default in any other loan obligation greater than
      $100,000; (v) the Company's dissolution, liquidation, merger, consolidation,
      bankruptcy, or future insolvency; and (vi) the commencement of any suit that
      threatens to have a material adverse effect on the Company, including the entry
      of a final judgment or settlement in excess of $100,000.




-10-


**NUWAY
        MEDICAL, INC. AND SUBSIDIARY**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS**
 ***(Unaudited)***




**Second
      Offering**




In
      January 2005, pursuant to a private offering that commenced in that month and
      terminated in August 2005 (the “Second Offering”), the Company received gross
      and net proceeds of $75,000 from two outside investors and issued its
      convertible promissory note (the “Second Offering Note”) due and payable one
      year from the date of issuance. The Second Offering Note bears interest at
      a
      rate of 10% per annum, payable on the maturity date. The Second Offering Note
      can be converted, in whole or in part, into shares of the Company's common
      stock, on the basis ranging from $.005 to $0.016 per share, at any time prior
      to
      maturity by either the Company or the holder. The holder has the right to
      include (piggyback) the shares of common stock in a registration of securities
      filed by the Company, other than on Form S-4 or Form S-8.




The
      Company's payment obligations under the Second Offering Note may be accelerated
      upon the following events: (i) the sale of the Company's assets outside the
      ordinary course of business; (ii) a breach of the representations and warranties
      contained within the evidencing the loan; (iii) the failure to timely pay the
      note; (iv) the Company's default in any other loan obligation greater than
      $100,000; (v) the Company's dissolution, liquidation, merger, consolidation,
      bankruptcy, or future insolvency; and (vi) the commencement of any suit that
      threatens to have a material adverse effect on the Company, including the entry
      of a final judgment or settlement in excess of $100,000.




In
      February 2005, the Company received gross proceeds of $51,000 and net proceeds
      of $47,000 from four outside investors and issued Second Offering Notes which
      allow conversion into an aggregate total of 5,558,036 shares of common stock
      (at
      a conversion price of approximately $0.009 per common share).




In
      April
      2005, the Company received gross proceeds of $29,000 and net proceeds of $23,750
      from two outside investors and issued Second Offering Notes which allow
      conversion into an aggregate total of 2,500,000 shares of common stock (at
      a
      conversion price of approximately $0.009 per common share).




In
      May 2005, the Company received gross and net proceeds of $50,000 and $47,500
      from an outside investor and issued a Second Offering Note which allows
      conversion into a total of 7,142,857 shares of common stock (at a conversion
      price of $0.007 per common share).




In
      June
      2005, the Company received gross and net proceeds of $256,120 from eleven
      outside investors and issued Second Offering Notes which allow conversion into
      an aggregate total of 28,612,000 shares of common stock (at a weighted average
      conversion price of approximately $0.009 per common share).




-11-


**NUWAY
        MEDICAL, INC. AND SUBSIDIARY**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS**
 ***(Unaudited)***




Also
      in
      July 2005, the Company received gross proceeds of $10,000 and net proceeds
      of
      $9,500 from an outside investor and issued a Second Offering Note which allows
      conversion into an aggregate total of 625,000 shares of common stock (at a
      conversion price of $0.016 per common share).




In
      August
      2005, the Company received gross proceeds of $260,000 and net proceeds of
      $252,000 from five outside investors and issued Second Offering Notes which
      allow conversion into an aggregate total of 16,250,000 shares of common stock
      (at a conversion price of $0.016 per common share).




**Third
      Offering**




Pursuant
      to another private offering that commenced in September 2005 and terminated
      in
      February 2006, on December 31, 2005, the Company sold an aggregate amount of
      $299,500 of its promissory notes (the "Third Offering Notes") due and payable
      January 31, 2007 to twelve individual investors. Each Third Offering Note bears
      interest at a rate of 10% per annum, and can be converted, in whole or in part,
      into shares of the common stock of the Company at an initial conversion price
      of
      $0.025 per share. The Third Offering terminated on February 21, 2006, by which
      date the Company had raised $1,102,000 gross and net proceeds. Of this amount,
      $802,500 **** gross
      and
      net proceeds were raised during the three-month period ended March 31, 2006,
      and
      the balance had been raised during 2005.




The
      Third
      Offering Notes may not be converted by either the Company or the holder unless
      and until each of the following events has first occurred: (i) the Company's
      stockholders have approved an increase in the number of shares of common stock
      authorized by the Company's Certificate of Incorporation in an amount not less
      than the amount required to permit all notes and warrants issued in this series
      to be converted into shares of the Company's Common Stock as provided herein,
      at
      a validly held meeting of stockholders at which a quorum is present and acting
      throughout; and (ii) the Company has filed with the Secretary of State of State
      of Delaware a Certificate of Amendment to the Company's Certificate of
      Incorporation to amend its Certificate of Incorporation to increase the number
      of shares of common stock authorized by the Company's Certificate of
      Incorporation.




Purchasers
      of the Third Offering Notes received, for no additional consideration, a stock
      purchase warrant (the "Third Offering Warrant") entitling the holder to purchase
      a number of Shares of Common Stock equal to the number of Shares of Common
      Stock
      into which the Third Offering Note is convertible. The Third Offering Warrant
      is
      exercisable at an initial price of $0.05 per Share and will expire on January
      31, 2008.




-12-


**NUWAY
        MEDICAL, INC. AND SUBSIDIARY**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS**
 ***(Unaudited)***




**Other
      Issuances**




In
      March
      2006, the Company issued 120,000 shares of common stock in connection with
      the
      conversion, at the request of one stockholder, of 120,000 shares of convertible
      preferred stock.




All
      of
      these offerings and sales were made in reliance on the exemption from
      registration contained in Section 4(2) of the Securities Exchange Act and/or
      Regulation D promulgated thereunder as not involving a public offering of
      securities.




Until
      the
      Company’s stockholders approve an amendment to the Company’s charter to increase
      the number of authorized shares of common stock, the Company will be unable
      to
      fulfill its obligations to all convertible noteholders to permit the conversion
      into common stock of amounts due pursuant to the terms of the convertible notes.
      In the event that the Company has not raised further capital prior to the
      maturity dates of the convertible notes, the Company would be in default of
      those notes if its stockholders have not formally approved an increase in the
      number of authorized common shares. The Company is not, at this time, in default
      of the convertible notes.





**Note
      5.** **Execution
      of Letter of Intent**





General. On July
      25, 2005, the Company executed a letter of intent ("LOI") with IOWC
      Technologies, Inc. (“IOWC”), pursuant to which the Company will acquire certain
      of IOWC's assets (the “Purchased Assets”), consisting of certain intellectual
      property, including two United States patents (collectively, the "BioLargo
      Technology"), and two license and/or distributor agreements pursuant to which
      IOWC has licensed the BioLargo Technology for use in products designed for
      distribution in the food, medical and biohazardous material transportation
      industries. All assets not constituting the Purchased Assets will remain the
      property of IOWC following the closing. The Company will not assume any
      liabilities of IOWC.




The
      parties also agreed that on or prior to the closing, they would enter into
      a
      definitive asset purchase agreement (the "Asset Purchase Agreement"), and other
      agreements, including a research and development agreement (the "R&D
      Agreement"), to effect the transactions (the "Transactions") on or prior to
      the
      closing.




The
      LOI
      further provides that, at the closing of the Transactions, the Company and
      Dennis Calvert, the President and CEO of the Company, will enter into an
      employment agreement for a term of five years, providing Mr. Calvert with a
      monthly salary of $15,400 for 2006, and a 10% increase in his monthly salary
      for
      each calendar year thereafter. It is anticipated that the present management
      of
      the Company will remain in place after the Closing and that Kenneth R. Code,
      IOWC’s primary shareholder and the inventor of the BioLargo Technology, will
      become the Company's Chief Technology Officer. In connection therewith, Mr.
      Code
      will enter into an employment agreement with the Company (the "Code Employment
      Agreement").




-13-


**NUWAY
        MEDICAL, INC. AND SUBSIDIARY**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS**
 ***(Unaudited)***




Marketing
      and Licensing Agreement .
      In
      connection with the previously described Transactions and in partial
      implementation thereof, on December 31, 2005, the Company executed a Marketing
      and Licensing Agreement (the “M&L Agreement”) with Mr. Code and IOWC.
      Pursuant to the M&L Agreement, the Company, through its wholly-owned
      subsidiary BioLargo Life Technologies, Inc., a California corporation ("BLTI"),
      has the right ("Rights") to develop, market, sell and distribute products that
      were developed, and are in development, by Mr. Code and IOWC using the BioLargo
      Technology.




Mr.
      Code
      and IOWC also assigned to BLTI its rights and obligations under two license
      agreements, including with BioLargo, LLC, in which IOWC has a 20% interest,
      as
      well as its rights set forth in a LOI with another entity (collectively, the
      "Assigned Agreements").




The
      M&L Agreement provides that the Company shall receive any and all royalties,
      payments, license fees, and other consideration generated by the Assigned
      Agreements. As part of the M&L Agreement, IOWC has agreed to transfer its
      20% interest in BioLargo, LLC to the Company. In consideration of the Rights
      and
      the Assigned Agreements, the Company has agreed to issue IOWC a total of 38%
      of
      its common stock, calculated on an after-issued basis.




The
      parties further agreed to enter into additional agreements in furtherance of
      the
      July 2005 LOI between the Company and IOWC, including (i) the Asset Purchase
      Agreement, pursuant to which the Company will acquire the two U.S. patents
      held
      by IOWC; (ii) the R&D Agreement; and (iii) the Code Employment Agreement.




In
      consideration of the Asset Purchase Agreement, the Company has agreed to issue
      IOWC an additional one percent of its common stock, calculated on an
      after-issued basis. In consideration of the R&D Agreement and Code
      Employment Agreement, the Company has agreed to issue to Code individually
      17.6%
      of its common stock, calculated on an after-issued basis. As a result of the
      foregoing transactions, the Company will issue a total of 56.6% of its common
      stock to Mr. Code and IOWC, calculated on an after-issued basis as of the total
      number of shares of the Company’s common stock outstanding as of January 1,
      2006. The parties further agreed that to the extent that the Company issues
      additional equity in connection with one or more financing transactions after
      January 1, 2006, then the percentage of equity to be issued to Mr. Code and
      IOWC **** would
      be
      diluted pro rata.




The
      Code
      Employment Agreement is anticipated to provide that Mr. Code will be appointed
      Chief Technology Officer of BLTI, and receive a monthly salary of $15,400.




Consulting
      Agreement .
      For a
      variety of reasons, the Company believed it to be in its best interests to
      enter
      into a consulting agreement with Mr. Code pending the required approval by
      the
      Company’s stockholders (described below) of the Transactions. Accordingly, on
      June 20 **,** 2006,
      the Company entered into a Consulting Agreement (the "Consulting Agreement")
      with Mr. Code. Pursuant to the Consulting Agreement, the Company has engaged
      the
      services of Mr. Code, effective January 1, 2006, to advise the Company in
      research and development and technical support, and to provide other services
      and assistance to the Company in matters relating to the Company’s business.




-14-


**NUWAY
        MEDICAL, INC. AND SUBSIDIARY**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS**
 ***(Unaudited)***




During
      the term of the Consulting Agreement, Mr. Code shall be paid $15,400 per month,
      prorated for partial months, and shall be entitled to reimbursement for
      authorized business expenses incurred in the performance of his duties.




The
      Consulting Agreement contains provisions requiring Mr. Code to devote
      substantially all of his business time to the Company; prohibiting Mr. Code
      from
      directly or indirectly engaging in any business activity that would be
      competitive with the business of the Company or its affiliates, including BLTI;
      providing that during the term of the Consulting Agreement and for one year
      post-termination, Mr. Code will not solicit the Company’s employees or
      customers; and other standard provisions typical for a consulting
      agreement.




The
      Consulting Agreement also provides that the Company shall retain the exclusive
      right to use or distribute all creations which may be created during the term
      of
      the Consulting Agreement. Mr. Code has also agreed to protect, maintain and
      keep confidential any proprietary or confidential information of the Company
      and
      executed a non-disclosure and confidentiality agreement dated as of June 20,
      2006 in connection therewith.




The
      Consulting Agreement terminates on January 1, 2007, unless terminated earlier
      as
      provided therein. The Company and Mr. Code anticipate that the Consulting
      Agreement will be replaced with the Code Employment Agreement.




Stockholder
      Approval .
      The
      foregoing transactions are subject to approval by IOWC's board of directors
      and
      stockholders, and the Company's board of directors. The following matters,
      either required by the various terms of, or necessary to implement, the
      Transactions, are also subject to approval by the Company's
      stockholders:




·
            an
                amendment to the Company's Certificate of Incorporation increasing
                the
                number of authorized shares of its common
                stock;




·
            the
                issuance of the number of shares of common stock to IOWC required
                pursuant
                to the Transactions;




·
            a
                reverse split of the Company's common stock;
                and




·
            the
                election of Mr. Code to the Company's board of
                directors.




In
      the
      event that the Company's stockholders do not approve the issuance of stock,
      the
      M&L Agreement shall terminate, and all rights granted to the Company
      thereunder shall revert to Mr. Code and IOWC.




-15-


**NUWAY
        MEDICAL, INC. AND SUBSIDIARY**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS**
 ***(Unaudited)***




The
      Company anticipates that it will seek stockholder approval of these matters,
      and
      certain other matters, at a meeting of stockholders to be held during the fourth
      quarter of 2006.




The
      closing of the Transactions is subject to various conditions, including those
      described hereinabove, and conditions customary for transactions of this nature.
      The Company currently expects to close the Transactions in the fourth quarter
      of
      2006. However, given the numerous significant conditions which must be satisfied
      prior to the closing of the transactions, there can be no assurance that the
      transactions will be consummated as presently envisioned or at all.




**Note
      6. Extension of
      Augustine Loan**





On
      July
      29, 2005, the Company and the Augustine Fund finalized the terms of an amendment
      to the Augustine Loan and executed formal documentation, in which the parties
      agreed to further extend the maturity date to May 2006. In exchange, the Company
      issued a warrant that gives the Augustine Fund the right to purchase 8,000,000
      shares of the Company's common stock at $0.005 per share for a period of five
      years. Augustine Fund has agreed to further extend the maturity of the Augustine
      Loan to May 2007. Formal documentation of this amendment has not yet been
      executed.




**Note
      7. Revisions to New
      Millennium Note**





On
      April
      28, 2006, the Board and Mr. Calvert agreed to amend the New Millennium Note
      to
      (i) extend the due date to January 15, 2008; (ii) waive any payments of interest
      until the New Millennium Note becomes due; (iii) reduce the principal amount
      of
      the New Millennium Note from $1,120,000 to $900,000, equal to a 19.6% reduction,
      and New Millennium's basis in said Note; and (iv) correspondingly reduce the
      accrued but unpaid interest due under the terms of the New Millennium Note
      from
      $317,956 to $255,636, also equal to a 19.6% reduction.




**Note
      8. Stockholders'
      Equity**




The
      amounts related to common stock as of December 31,
      2005 were changed because the Company did not convert 120,000 shares of
      preferred stock until March 2006. It had erroneously been reflected as converted
      during 2005. The management of the Company believes it had an immaterial impact
      on the previously reported financial statements.




During
      2006, the Company was contacted by an entity
      entitled to 24,744 shares of stock pursuant to a transaction with the Company
      in
      2002. The share certificate had been issued in 2002, but the Company was unable
      to deliver the certificate because the stockholder's contact information was
      incorrect. Subsequently, the Company cancelled the shares. Therefore, in 2006,
      the Company reissued the share certificate and delivered it to the
      stockholder.




During
      2006, a review of outstanding preferred stock
      indicated that an overstatement of preferred shares had been made since 2003,
      and therefore an adjustment to the number of preferred stock outstanding was
      necessary. A further adjustment was made to the amount of par value of common
      stock to reflect par value based on the aggregate shares
      outstanding.




-16-




**NUWAY
      MEDICAL, INC. AND SUBSIDIARY**


**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**


***(Unaudited)***


**Item
      2.Management’s Discussion
      and Analysis**





This
      Quarterly Report on Form 10-QSB of NuWay Medical, Inc. (the "Company") contains
      forward-looking statements. These forward-looking statements include predictions
      regarding, among other things, our:




·
            business
                and acquisition plans, including the completion of previously-announced
                transactions; ·
            financing plans; ·
            general and administrative
              expenses;


·
            liquidity
                and sufficiency of existing cash;
                and


·
            the
                outcome of pending or threatened
                litigation.





You
      can
      identify these and other forward-looking statements by the use of words such
      as
      "may," "will," "expects," "anticipates," "believes," "estimates," "continues,"
      or the negative of such terms, or other comparable terminology. Forward-looking
      statements also include the assumptions underlying or relating to any of the
      foregoing statements.




Such
      statements, which include statements concerning future revenue sources and
      concentrations, selling, general and administrative expenses, research and
      development expenses, capital resources, additional financings and additional
      losses, are subject to risks and uncertainties, including, but not limited
      to,
      those discussed elsewhere in this Form 10-QSB, that could actual results to
      differ materially from those projected.




Our
      actual results could differ materially from those anticipated in these
      forward-looking statements as a result of various factors, including those
      set
      forth under the heading "Risk Factors" in our Annual Report on Form 10-KSB
      for
      the year ended December 31, 2005. Unless otherwise expressly stated herein,
      all
      statements, including forward-looking statements, set forth in this Form 10-QSB
      are as of June 30, 2006, and we undertake no duty to update this
      information.




**Plan
      of Operations**




***Overview***




The
      Company operated as a shell company during the six-month period ended June
      30,
      2006, and operations primarily consisted of the Company seeking funding,
      maintaining the corporate entity, complying with the reporting and other
      requirements of the Securities Exchange Commission (the "SEC"), engaging in
      ongoing research and development for the BioLargo Technology (as defined below),
      engaging in initial marketing activities for the BioLargo Technology and
      planning for the consummation of certain proposed transactions, as described
      below.




-17-




***The
      BioLargo Transactions***




General. On July
      25, 2005, the Company executed a letter of intent ("LOI") with IOWC
      Technologies, Inc. (“IOWC”), pursuant to which the Company will acquire certain
      of IOWC's assets (the “Purchased Assets”), consisting of certain intellectual
      property, including two United States patents (collectively, the "BioLargo
      Technology"), and two license and/or distributor agreements pursuant to which
      IOWC has licensed the BioLargo Technology for use in products designed for
      distribution in the food, medical and biohazardous material transportation
      industries. All assets not constituting the Purchased Assets will remain the
      property of IOWC following the closing. The Company will not assume any
      liabilities of IOWC.




The
      parties also agreed that on or prior to the closing, they would enter into
      a
      definitive asset purchase agreement (the "Asset Purchase Agreement"), and other
      agreements, including a research and development agreement (the "R&D
      Agreement"), to effect the transactions (the "Transactions") on or prior to the
      closing.




The
      LOI
      further provides that, at the closing of the Transactions, the Company and
      Dennis Calvert, the President and CEO of the Company, will enter into an
      employment agreement for a term of five years, providing Mr. Calvert with a
      monthly salary of $15,400 for 2006, and a 10% increase in his monthly salary
      for
      each calendar year thereafter. It is anticipated that the present management
      of
      the Company will remain in place after the Closing and that Kenneth R. Code,
      IOWC’s primary shareholder and the inventor of the BioLargo Technology, will
      become the Company's Chief Technology Officer. In connection therewith, Mr.
      Code
      will enter into an employment agreement with the Company (the "Code Employment
      Agreement").




Marketing
      and Licensing Agreement .
      In
      connection with the previously described Transactions and in partial
      implementation thereof, on December 31, 2005, the Company executed a Marketing
      and Licensing Agreement (the “M&L Agreement”) with Mr. Code and IOWC.
      Pursuant to the M&L Agreement, the Company, through its wholly-owned
      subsidiary BioLargo Life Technologies, Inc., a California corporation ("BLTI"),
      has the right ("Rights") to develop, market, sell and distribute products that
      were developed, and are in development, by Mr. Code and IOWC using the BioLargo
      Technology.




Mr.
      Code
      and IOWC also assigned to BLTI its rights and obligations under two license
      agreements, including with BioLargo, LLC, in which IOWC has a 20% interest,
      as
      well as its rights set forth in a LOI with another entity (collectively, the
      "Assigned Agreements").




The
      M&L Agreement provides that the Company shall receive any and all royalties,
      payments, license fees, and other consideration generated by the Assigned
      Agreements. As part of the M&L Agreement, IOWC has agreed to transfer its
      20% interest in BioLargo, LLC to the Company. In consideration of the Rights
      and
      the Assigned Agreements, the Company has agreed to issue IOWC a total of 38%
      of
      its common stock, calculated on an after-issued basis.




-18-




The
      parties further agreed to enter into additional agreements in furtherance of
      the
      July 2005 LOI between the Company and IOWC, including (i) the Asset Purchase
      Agreement, pursuant to which the Company will acquire the two U.S. patents
      held
      by IOWC; (ii) the R&D Agreement; and (iii) the Code Employment Agreement.




In
      consideration of the Asset Purchase Agreement, the Company has agreed to issue
      IOWC an additional one percent of its common stock, calculated on an
      after-issued basis. In consideration of the R&D Agreement and Code
      Employment Agreement, the Company has agreed to issue to Code individually
      17.6%
      of its common stock, calculated on an after-issued basis. As a result of the
      foregoing transactions, the Company will issue a total of 56.6% of its common
      stock to Mr. Code and IOWC, calculated on an after-issued basis as of the total
      number of shares of the Company’s common stock outstanding as of January 1,
      2006. The parties further agreed that to the extent that the Company issues
      additional equity in connection with one or more financing transactions after
      January 1, 2006, then the percentage of equity to be issued to Mr. Code and
      IOWC **** would
      be
      diluted pro rata.




The
      Code
      Employment Agreement is anticipated to provide that Mr. Code will be appointed
      Chief Technology Officer of BLTI, and receive a monthly salary of $15,400.




Consulting
      Agreement .
      For a
      variety of reasons, the Company believed it to be in its best interests to
      enter
      into a consulting agreement with Mr. Code pending the required approval by
      the
      Company’s stockholders (described below) of the Transactions. Accordingly, on
      June 20 **,** 2006,
      the Company entered into a Consulting Agreement (the "Consulting Agreement")
      with Mr. Code. Pursuant to the Consulting Agreement, the Company has engaged
      the
      services of Mr. Code, effective January 1, 2006, to advise the Company in
      research and development and technical support, and to provide other services
      and assistance to the Company in matters relating to the Company’s business.




During
      the term of the Consulting Agreement, Mr. Code shall be paid $15,400 per month,
      prorated for partial months, and shall be entitled to reimbursement for
      authorized business expenses incurred in the performance of his duties.




The
      Consulting Agreement contains provisions requiring Mr. Code to devote
      substantially all of his business time to the Company; prohibiting Mr. Code
      from
      directly or indirectly engaging in any business activity that would be
      competitive with the business of the Company or its affiliates, including BLTI;
      providing that during the term of the Consulting Agreement and for one year
      post-termination, Mr. Code will not solicit the Company’s employees or
      customers; and other standard provisions typical for a consulting
      agreement.




The
      Consulting Agreement also provides that the Company shall retain the exclusive
      right to use or distribute all creations which may be created during the term
      of
      the Consulting Agreement. Mr. Code has also agreed to protect, maintain and
      keep confidential any proprietary or confidential information of the Company
      and
      executed a non-disclosure and confidentiality agreement dated as of June 20,
      2006 in connection therewith.




-19-




The
      Consulting Agreement terminates on January 1, 2007, unless terminated earlier
      as
      provided therein. The Company and Mr. Code anticipate that the Consulting
      Agreement will be replaced with the Code Employment Agreement.




Stockholder
      Approval .
      The
      foregoing transactions are subject to approval by IOWC's board of directors
      and
      stockholders, and the Company's board of directors. The following matters,
      either required by the various terms of, or necessary to implement, the
      Transactions, are also subject to approval by the Company's
      stockholders:




·
            an
                amendment to the Company's Certificate of Incorporation increasing
                the
                number of authorized shares of its common
                stock;




·
            the
                issuance of the number of shares of common stock to IOWC required
                pursuant
                to the Transactions;




·
            a
                reverse split of the Company's common stock;
                and




·
            the
                election of Mr. Code to the Company's board of
                directors.




In
      the
      event that the Company's stockholders do not approve the issuance of stock,
      the
      M&L Agreement shall terminate, and all rights granted to the Company
      thereunder shall revert to Mr. Code and IOWC.




The
      Company anticipates that it will seek stockholder approval of these matters,
      and
      certain other matters, at a meeting of stockholders to be held during the fourth
      quarter of 2006.




The
      closing of the Transactions is subject to various conditions, including those
      described hereinabove, and conditions customary for transactions of this nature.
      The Company currently expects to close the Transactions in the fourth quarter
      of
      2006. However, given the numerous significant conditions which must be satisfied
      prior to the closing of the transactions, there can be no assurance that the
      transactions will be consummated as presently envisioned or at all.




***Other***




The
      Company will need working capital resources to maintain the Company's status
      and
      to fund other anticipated costs and expenses during the year ending December
      31,
      2006 and beyond. The Company's ability to continue as a going concern is
      dependent on the Company's ability to raise capital. If the Company is able
      to
      acquire IOWC, it will need additional capital until and unless that prospective
      operation is able to generate positive working capital sufficient to fund the
      Company's cash flow requirements from operations. The Company has conducted
      an
      offering of its convertible notes and warrants to provide such interim funding
      and intends to seek additional capital. See "Liquidity and Capital Resources"
      below.




-20-




**Results
      of Operations**




The
      Company had no revenues from continuing operations during the three- and
      six-month periods ended June 30, 2006 and 2005.




***Research
      and Development***




Research
      and development expenses were $74,000 and $84,000 for the three- and six-month
      periods ended June 30, 2006, respectively, compared to $0 and $0 for the three-
      and six-month periods ended June 30, 2005, respectively, an increase of $74,000
      and $84,000, respectively. These increases are attributable to the research
      and
      development related to the BioLargo Technology, specifically regarding the
      testing of the efficacy of the BioLargo Technology in certain applications,
      and
      the development of production methods for use of the BioLargo Technology in
      certain applications.




***Selling,
      General and Administrative Expense***




Selling,
      general and administrative expenses were $207,000 and $550,000 for the three-
      and six-month periods ended June 30, 2006, respectively, compared to $174,000
      and $368,000 for the three- and six-month periods ended June 30, 2005,
      respectively. This increase is primarily attributable to the increase in
      consulting expenses compared with the same period in 2005. The largest
      components of these expenses were:




a.  Salaries
      and Payroll-Related Expenses: These expenses were $46,000 and $92,000 for the
      three- and six-month periods ended June 30, 2006, respectively, compared to
      $82,000 and $131,000 for the three- and six-month periods ended June 30, 2005,
      respectively, a decrease of $36,000 and $39,000, respectively. The decrease
      in
      the three- and six- month period ended June 30, 2006 is primarily attributable
      to an expense recorded by the Company in the prior year for the issuance of
      shares of the Company’s common stock to an officer of the Company in lieu of
      cash compensation.




b.  Consulting
      Expenses: These expenses were $76,000 and $218,000 for the three- and six-month
      periods ended June 30, 2006, respectively, compared to $47,000 and $88,000
      for
      the three- and six-month periods ended June 30, 2005, respectively, an increase
      of $29,000 and $130,000 respectively. The increase in the three- and six-month
      period ended June 30, 2006 is attributable to the increase in the Company’s need
      for outside consultants during that time, including its consulting agreement
      with Mr. Code.




c.  Legal
      Expenses: These expenses were $31,000 and $118,000 for the three- and six-month
      periods ended June 30, 2006, respectively, compared to $21,000 and $72,000
      for
      the three- and six-month periods ended June 30, 2005, respectively, an increase
      of $10,000 and $46,000, respectively. The increases are primarily due to the
      high level of legal services required during the six-month period ended June
      30,
      2006 with respect to IOWC and other legal services.




-21-




***Net
      Loss***




Net
      loss
      for the three- and six-month periods ended June 30, 2006 was $12,000 and
      $453,000, respectively, or $(0.01) and $(0.01) per share. Comparatively, for
      the
      three- and six-month periods ended June 30, 2005, net loss was $244,000, and
      $472,000, respectively, or $(0.01) and $(0.01) per share.




**Liquidity
      and Capital Resources**




***General***




Cash
      and
      cash equivalents totaled $347,086 at June 30, 2006. The Company had no revenues
      in the six-month period ended June 30, 2006 and was forced to consume cash on
      hand to fund operations. The Company's cash position is insufficient to meet
      its
      continuing anticipated expenses or fund anticipated operating expenses after
      the
      consummation of the Transactions with IOWC. The Company will be required to
      raise additional capital to sustain basic operations through the remainder
      of
      2006.




The
      financial statements accompanying this Report have been prepared on a going
      concern basis, which contemplates the realization of assets and the settlement
      of liabilities and commitments in the normal course of our business. The Company
      had a net loss of $533,431 for the six-month period ended June 30, 2006; a
      negative cash flow from operating activities of $493,876 for the six-month
      period ended June 30, 2006; and an accumulated deficit of $28,229,187 as of
      December 31, 2005, and $28,762,618 as of June 30, 2006.




As
      of
      June 30, 2006, the Company had limited liquid and capital resources, raising
      a
      substantial doubt about the Company's ability to continue as a going concern.
      Ultimately, the Company's ability to continue as a going concern is dependent
      upon its ability to attract new sources of capital, establish an acquisition
      or
      reverse merger candidate with continuing operations, such as IOWC, attain a
      reasonable threshold of operating efficiencies and achieve profitable
      operations. The financial statements do not include any adjustments that might
      be necessary if the Company is unable to continue as a going
      concern.




The
      Company has approximately $1,945,712 aggregate principal amount of its
      promissory notes that mature at various times during 2006 and the three-month
      period ending March 31, 2007. The Company does not presently have funds
      sufficient to repay these obligations as they mature. Even though the terms
      of
      all of these notes permit the noteholder to convert the notes into shares of
      our
      common stock, until the Company’s stockholders approve an amendment to the
      Company’s charter to increase the number of authorized shares of common stock,
      the Company will be unable to fulfill its obligations to all noteholders to
      permit the conversion into common stock of amounts due pursuant to the terms
      of
      the notes. In the event that the Company has not raised further capital prior
      to
      the maturity dates of the convertible notes, the Company would be in default
      of
      those notes if its stockholders have not formally approved an increase in the
      number of authorized common shares, or unless the Company is able to refinance
      or renegotiate the terms of these notes. No financing is in place at present,
      and it is unknown if any financing will be in place in the future, which would
      permit the Company to repay these notes in full as they mature.




-22-




The
      Company has obtained the consent of all of its noteholders to extend the
      maturity date of those convertible notes maturing on various dates through
      November 2006, until after the Company has held a stockholders’ meeting,
      currently anticipated for the fourth quarter of 2006, to approve, among other
      things, an increase in the authorized capital stock of the Company and thereby
      permit the conversion of such notes into shares of the Company’s common stock.




Pursuant
      to a private offering that commenced in September 2005 and terminated in
      February 2006, the Company offered up to $2,000,000 of its convertible notes
      (the “Third Offering Notes”), which are due and payable on January 31, 2007. The
      Third Offering Notes bear interest at a rate of 10% per annum, payable on the
      maturity date, and can be converted, in whole or in part, into shares of the
      Company's common stock, on a basis of $0.025 per common share, at any time
      prior
      to maturity by either the Company or the holder. Purchasers of the Third
      Offering Notes will receive, for no additional consideration, a stock purchase
      warrant (a "Third Offering Warrant") entitling the holder to purchase a number
      of shares of Common Stock equal to the number of shares of Common Stock into
      which the Third Offering Note is convertible, at an initial price of $0.05
      per
      share, with an expiration of January 31, 2008. The offering terminated on
      February 21, 2006, by which date the Company had raised $1,102,000 gross and
      net
      proceeds. Of this amount, $802,500 gross and net proceeds were raised during
      the
      three-month period ended March 31, 2006, and the balance had been raised during
      2005. See Part II, Item 2, "Sales of Unregistered Securities".




The
      Company will be required to raise additional capital during 2006 to sustain
      its
      operations and meet its liabilities as they become due for the next twelve
      months, as well as to fund the operations of the Company after the Transactions
      are consummated. While the Company is actively considering alternatives for
      the
      Company's longer-term financial requirements, including additional raises of
      capital from investors in the form of convertible debt or equity, there is
      no
      assurance that the Company will be able to raise any additional capital. It
      is
      unlikely that the Company will be able to qualify for bank debt until such
      time
      as the Company is able to demonstrate the financial strength to provide
      confidence for a lender.




Significant
      debt obligations of the Company at June 30, 2006 included:




(i)
      $420,000 due to Augustine II, LLC (the "Augustine Fund"), together with accrued
      but unpaid interest, described in more detail below;




(ii)
      a **** $900,000
      note payable which was purchased in March 2003 by New Millennium Capital
      Partners, LLC ("New Millennium"), an entity owned and controlled by the
      Company's president, Dennis Calvert, and certain members of his family, together
      with accrued but unpaid interest, described in more detail below;




-23-




(iii)
      amounts owed to Mr. Calvert personally in the aggregate amount of approximately
      $334,000, as described below;




(iv)
      convertible promissory notes to various investors in the aggregate principal
      amount of $816,000, plus accrued interest;




(v)
      approximately $21,000 outstanding remaining on a settlement agreement with
      former convertible debenture holders;




(vi)
      $35,000 in remaining balance due to a former advisory board member, from a
      promissory note dated November 20, 2003 in the original principal amount of
      $65,000; and




(vii)
      convertible promissory notes issued to various investors in the offering that
      terminated in February 2006 in the aggregate principle amount of
      $1,102,000.




As
      of
      June 30, 2006, there was $698,029 of accrued interest recorded related to these
      obligations.




***Augustine
      Fund Note***




On
      June
      10, 2003 the Company entered into a Term Loan Agreement ("Loan Agreement")
      with
      the Augustine Fund, pursuant to which the Augustine Fund agreed to lend the
      Company $420,000, payable in installments of $250,000, $100,000, and $70,000
      (the "Augustine Loan"). The proceeds of the Augustine Loan were used by the
      Company for working capital.




Principal
      and interest, at an annual rate of 10%, of the Augustine Loan, was originally
      due on February 29, 2004. In addition, the Loan Agreement contains certain
      requirements that the Company make mandatory prepayments of the Augustine Loan
      from the proceeds of any asset sales outside of the ordinary course of business,
      and, on a quarterly basis, from positive cash flow. In addition, all or any
      portion of the Augustine Loan may be prepaid by the Company may prepay all
      or
      any portion of the Augustine Loan at any time without premium or
      penalty.




As
      additional consideration for making the Augustine Loan, the Augustine Fund
      received five-year warrants to purchase up to 6,158,381 shares of the Company's
      common stock at an exercise price of $0.16 per share. The Company could require
      that the warrants be exercised if certain conditions were satisfied. Since
      these
      conditions were not fully satisfied by the maturity date, the Loan Agreement
      provides that the Augustine Fund may, at any time following the maturity date
      and so long as the warrants remain exercisable, elect to exercise all or any
      portion of the warrants pursuant to a "cashless exercise", whereby the Augustine
      Fund would be issued the net amount of shares of our common stock, taking into
      consideration the difference between the exercise price of the warrants and
      the
      fair market value of our common stock at the time of exercise, without having
      to
      pay anything to the Company for such exercise.




-24-




As
      security for the Augustine Loan, New Millennium Capital Partners LLC ("New
      Millennium"), a company controlled and owned by the Company's president, Dennis
      Calvert, and members of his family, pledged 2.5 million shares of the Company's
      common stock owned by New Millennium, and, in addition, the Company has granted
      the Augustine Fund a security interest in its 51% membership ownership interest
      in NuWay Sports. As a result, the Company will need to consent of the Augustine
      Fund to release its security interest in NuWay Sports if the Company is able
      to
      sell NuWay Sports.




Prior
      to
      the original maturity date of the Augustine Loan, the Company spoke with
      representatives of the Augustine Fund and advised them that the Company was
      unable to pay the amount due under the Augustine Loan by the February 29, 2004
      maturity date. On March 30, 2004, the Augustine Fund agreed to extend the
      maturity date of the Loan Agreement to August 2004. In addition to the extension
      of the maturity date, the Augustine Fund was given the option of having the
      Augustine Loan satisfied in cash or by the conversion of any remaining principal
      balance and any accrued interest on the Augustine Loan to shares of the
      Company's common stock at a 15% discount to market, so long as Augustine Fund's
      holdings do not exceed 4.9% of the total issued and outstanding shares of the
      Company's common stock at any time. In addition, the warrants held by the
      Augustine Fund to purchase 6,158,381 shares of the Company's common stock were
      re-priced to an exercise price of $.035 per share. Exercise of the warrants
      is
      also subject to the limit that the Augustine Fund does not hold more than 4.9%
      of the issued and outstanding shares of the Company's common stock.




On
      July
      29, 2005, the Company and the Augustine Fund finalized the terms of an amendment
      to the Augustine Loan and executed formal documentation, in which the parties
      agreed to further extend the maturity date to May 2006. In exchange, the Company
      issued a warrant that gives the Augustine Fund the right to purchase 8,000,000
      shares of the Company's common stock at $0.005 per share for a period of five
      years. Augustine Fund has agreed to further extend the maturity of the Augustine
      Loan to May 2007. Formal documentation of this amendment has not yet been
      executed.




Accordingly,
      as of June 30, 2006, the principal amount of the loan, together with
      approximately $202,988 in accrued but unpaid interest, had not been
      repaid.




***Obligation
      to New Millennium***




In
      conjunction with the acquisition from Med Wireless of the license for the its
      technology in 2002, the Company assumed a $1,120,000 note (the "Note") with
      interest at 10% per annum payable by Med Wireless to Summitt Ventures, Inc.
      ("Summitt Ventures"). The Note is secured by the Company's assets and was
      originally due on June 15, 2003. It was sold, as part of a series of
      transactions with Mark Anderson, a former consultant and former principle
      stockholder of the Company, and his affiliated entities, to New Millennium,
      an
      entity owned and controlled by the Company's president, Dennis Calvert, and
      certain members of his family, in March 2003.




-25-




Since
      New
      Millennium purchased the Note, the Company has attempted multiple times to
      convert the Note, but has been unable to obtain the required stockholder vote,
      due to a lack of quorum, to do so. New Millennium orally agreed with the Company
      to extend the maturity date of the Note to a first payment due October 1, 2003
      in the amount of $100,000 and the balance of the principal due on April 1,
      2004.
      The Company was unable to make the $100,000 payment on the Note on the extended
      due date of October 1, 2003.




In
      October 2004, New Millennium agreed to extend the maturity of the Note
      indefinitely until the Company acquired assets or an operating business that
      would allow it to meet its obligations on the note.




Under
      the
      terms of the New Millennium Note, it is possible that Summitt Ventures, and
      Mr.
      Anderson's affiliated entities may have a claim to reacquire the shares of
      the
      Company's common stock that were sold to New Millennium. The New Millennium
      Note
      is purportedly secured by the purchased shares of the Company's common stock;
      however, New Millennium and Mr. Calvert believe that Mr. Anderson and his
      affiliates have not perfected their security interest in those shares. In
      addition, the Augustine Fund is the pledgee of 2,500,000 of those shares and
      has
      physical possession of those shares.




On
      April
      28, 2006, the Board and Mr. Calvert agreed to amend the New Millennium Note
      to
      (i) extend the due date to January 15, 2008; (ii) waive any payments of interest
      until the New Millennium Note becomes due; (iii) reduce the principal amount
      of
      the New Millennium Note from $1,120,000 to $900,000, equal to a 19.6% reduction,
      and New Millennium's basis in said Note; and (iv) correspondingly reduce the
      accrued but unpaid interest due under the terms of the New Millennium Note
      from
      $317,956 to $255,636, also equal to a 19.6% reduction.




***Obligations
      to Dennis Calvert***




In
      2003
      and 2004 the Company's President, Dennis Calvert, loaned money to the Company
      by
      paying from his personal funds certain of the Company's expenses. A significant
      portion of these personal funds was obtained by Mr. Calvert by refinancing
      his
      primary residence and cashing out equity thereon. On March 7, 2005, the Company
      and Mr. Calvert agreed such that the $101,770 still outstanding and owed by
      the
      Company to Mr. Calvert will be repaid under the terms of a promissory note
      bearing interest of 10% per annum, requiring monthly payments and maturing
      on
      January 15, 2006.




As
      of
      June 30, 2006, the Company had repaid this entire loan. As of June 30, 2006,
      the
      Company had accrued an expense related to the unpaid accrued compensation due
      Mr. Calvert in the amount of $333,727. Mr. Calvert has tendered to the Company
      a
      proposal to convert this unpaid accrued compensation to the Company’s common
      stock upon approval by the Company’s stockholders of an amendment to the
      Company’s Certificate of Incorporation increasing the number of authorized
      shares of its common stock.




-26-




**Critical
      Accounting Policies**




The
      SEC
      recently issued Financial Reporting release No. 60, "Cautionary Advice Regarding
      Disclosure About Critical Accounting Policies" ("FRR 60"), suggesting companies
      provide additional disclosure and commentary on their most critical accounting
      policies. In FRR 60, the SEC defined the most critical accounting policies
      as
      the ones that are most important to the portrayal of a company's financial
      condition and operating results, and require management to make its most
      difficult and subjective judgments, often as a result of the need to make
      estimates of matters that are inherently uncertain. Based on this definition,
      the Company's most critical accounting policies include: non-cash transactions
      and compensation valuations that affect the total expenses reported in the
      current period and/or values of assets received in exchange.




The
      Company has established a policy relative to the methodology to determine the
      value assigned to each intangible acquired with or licensed by the Company
      and/or services or products received for non-cash consideration of the Company's
      common stock. The value is based on the market price of the Company's common
      stock issued as consideration, at the date of the agreement of each transaction
      or when the service is rendered or product is received, as adjusted for
      applicable discounts.




The
      methods, estimates and judgments the Company uses in applying these most
      critical accounting policies have a significant impact on the results of the
      Company reports in its financial statements.




**Item
      3. Controls and Procedures**




(a)
      Evaluation of disclosure controls and procedures: Our management evaluated,
      with
      the participation of our Chief Executive Officer and Chief Financial Officer,
      the effectiveness of our disclosure controls and procedures as of the end of
      the
      period covered by this Quarterly Report on Form 10-QSB. Based on this
      evaluation, our Chief Executive Officer and Chief Financial Officer have
      concluded that our disclosure controls and procedures (as defined in Rules
      13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange
      Act") are effective to ensure that information required to be disclosed by
      us in
      reports that we file or submit under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in SEC rules and
      forms. It should be noted that the design of any system of controls is based
      in
      part upon certain assumptions about the likelihood of future events, and there
      can be no assurance that any design will succeed in achieving its stated goals
      under all potential future conditions, regardless of how remote.




(b)
      Changes in internal control over financial reporting: There was no change in
      our
      internal control over financial reporting that occurred during the period
      covered by this Quarterly Report on Form 10-QSB that has materially affected,
      or
      is reasonably likely to materially affect, our internal control over financial
      reporting.




-27-


**PART
      II**




**Item
      1. Legal Proceedings**




In
      June
      2002, Geraldine Lyons, the Company's former Chief Financial Officer, sued the
      Company and the Company's former president Todd Sanders, for breach of her
      employment contract. The lawsuit was brought in the Circuit Court of the 11th
      Judicial Circuit in Miami-Dade County in Florida. Ms. Lyons seeks approximately
      $25,000 due under the contract and the issuance of 100,000 shares of common
      stock, with a guarantee that the stock could be sold by Ms. Lyons for $300,000.
      Ms. Lyons alleges that additional funds are due under her employment contract;
      that the contract requires the Company guarantee that she can sell for $300,000
      the 100,000 shares of stock the Company is required to issue her; and, that
      Mr.
      Sanders promised to purchase from her 100,000 shares of Company common stock
      held by her at the price of $4.00 per share.




The
      Company has counter-sued Ms. Lyons for breach of fiduciary duty, fraud,
      violation of Section 12(a)(2) of the Securities Act of 1933, violation of
      Section 517.301 of the Florida Statutes, negligent misrepresentation, conversion
      and unjust enrichment resulting from the required restatement of the Company's
      financial statements for the years ended December 31, 2000 and December 31,
      1999. The restatements corrected the previous omission of certain material
      expenses related primarily to compensation expense arising from warrants issued
      and repriced stock options, as well as other errors.




The
      case
      is ongoing at this time, although it has not been vigorously prosecuted by
      Ms.
      Lyons or the Company, in the Company's case primarily because the Company had
      lacked the resources to do so. The Company entered into an agreement ("Legal
      Defense Agreement") in December 2004 such that Augustine II, LLC ("Augustine
      Fund") would pay for the legal expenses associated with the Company's defense
      and affirmative claims in this lawsuit (with the right to withdraw funding
      at
      any time), and in exchange would share any net proceeds awarded to the Company
      pursuant to a settlement or judgment. The sharing arrangement provides that
      Augustine Fund will recover first, out of any money available from recovery,
      its
      legal and out of pocket expenses related to the lawsuit; second, 85% of any
      additional amounts recovered up to $500,000; and third, 50% of amounts recovered
      beyond $500,000. While the Company believes that it has meritorious positions
      in
      this litigation, given the inherent nature of litigation, it is not possible
      to
      predict the outcome of this litigation or the impact it would have on the
      Company.




In
      May
      2004, the Company was sued by Flight Options, Inc. ("Flight Options"), a jet
      plane leasing company, in the Superior Court of Orange County California. The
      lawsuit alleges that the Company owes Flight Options approximately $418,300,
      pursuant to a five-year lease assigned to the Company by the Company's former
      president Todd Sanders, from his corporation, Devenshire Management Corporation
      ("Devenshire"). Management of the Company believes that the assignment of the
      lease was not properly authorized or approved by the Company, and that by Mr.
      Sander's failure to identify the lease in a December 2002 settlement agreement
      with the Company, he breached the terms of that settlement agreement and,
      pursuant to the settlement agreement, must indemnify the Company for any losses
      owed to Flight Options. The Company filed a cross-complaint against Mr. Sanders
      and Devenshire seeking indemnity and alleging Mr. Sander's breached his
      fiduciary duties in connection with the assignment of the lease. The Company's
      Legal Defense Agreement with the Augustine Fund applies also to the Flight
      Options litigation.




-28-




On
      March
      17, 2005, the Company settled with Flight Options pursuant to a stipulation
      that
      would have allowed the Company to pay Flight Options $100,000 on or before
      August 5, 2005; if $100,000 was not paid by August 5, 2005, Flight Options
      could
      file a judgment against the Company for $163,310. The Company did not make
      a
      payment on or before August 5, 2005. Subsequently, the parties agreed that
      the
      Company would pay Flight Options a total of $116,000, which amount was paid.
      In
      exchange, Flight Options dismissed the case.




At
      about
      the time of the settlement with Flight Options, the Company, Mr. Sanders and
      Devenshire agreed to submit the matters in the cross-complaint, including the
      indemnity claim, to binding arbitration. On March 7, 2006, an arbitrator issued
      a binding award in favor of the Company and against Mr. Sanders for
      $120,000.




Legal
      Fees in the matter have been paid by Augustine, pursuant to the Legal Defense
      Agreement between Augustine and the Company. In January 2006, Augustine and
      the
      Company agreed to modify the terms of the Legal Defense Agreement to allow
      for
      both parties to share in any amounts which might be recovered from Sanders,
      on a
      percentage basis equal to the respective costs incurred by each party. Legal
      Fees incurred by Augustine are estimated to be approximately $81,000 as of
      February 2006, but will likely increase. On June 14, 2006, the arbitrator
      increased the arbitration award from $120,000 to $175,000 at the Company’s
      request to account for its attorneys fees. The Company intends to confirm the
      arbitration award with the Superior Court and seek a judgment against Mr.
      Sanders and his company Devenshire, and can make no assurances it will be able
      to collect on any such judgment.




The
      Company is party to various other claims, legal actions and complaints arising
      periodically in the ordinary course of business. In the opinion of management,
      no such matters will have a material adverse effect on the Company's financial
      position or results of operations.




-29-




**Item 6.
      Exhibits**




The
      exhibits listed below are attached hereto and filed herewith:




Exhibit
      No.      Description




31.1
            Certification
                of Chief Executive Officer of Quarterly Report Pursuant to Rule
                13(a)-15(e) or
                Rule 15(d)-15(e).




31.2
            Certification
                of Chief Financial Officer of Quarterly Report Pursuant to 18 U.S.C.
                Section 1350




32
            Certification
                of Chief Executive Officer and Chief Financial Officer of Quarterly
                Report
                pursuant to Rule 13(a)-15(e) or
                Rule 15(d)-15(e).




-30-





**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
      caused this report to be signed on its behalf by the undersigned, hereunto
      duly
      authorized.




NUWAY
              MEDICAL,
              INC.Date: November
              17, 2006
            By:
            /s/ Dennis
              CalvertDennis
                CalvertPresident,
              Chief
              Executive Officer and Interim Chief Financial Officer




-31-




**EXHIBIT
      INDEX**





Exhibit
      No.      Description




31.1
            Certification
                of Chief Executive Officer of Quarterly Report Pursuant to Rule
                13(a)-15(e) or
                Rule 15(d)-15(e).




31.2
            Certification
                of Chief Financial Officer of Quarterly Report Pursuant to 18 U.S.C.
                Section 1350




32
            Certification
                of Chief Executive Officer and Chief Financial Officer of Quarterly
                Report
                pursuant to Rule 13(a)-15(e) or
                Rule 15(d)-15(e).




-32-